By Anoushka Kenley, Jack Larkham and Nicole Sykes

The UK now has 2.5 million people who are out of the labour market due to long-term sickness, and the number of people who are economically inactive – unemployed and neither expected to seek nor able to start work imminently – has risen by 500,000 since the start of the pandemic. This increase has plagued policymakers and employers alike and prompted a hunt for solutions.

Over the weekend, the Chancellor announced the government’s latest attempt to bring inactivity down, with a shake-up of Universal Credit elements related to childcare, disability and conditionality, as well as the introduction of “returnerships” to get over-50s back to work.

The number of groups the announcement seeks to address hints at just how knotty and complex the UK’s inactivity problem is. It is a health problem, with mental health driving up inactivity among young people and chronic conditions driving up inactivity among older people. It is a childcare problem, with longstanding concerns about women not returning to work due to affordability. And it is an employer problem, with older people thought to increasingly feel unwelcome in the workplace.

But the proposals also highlight how policymakers have a habit of reaching for the same levers to achieve change over and over again. How many times have politicians decided that welfare tweaks, plus a subsidised employment scheme, plus a little reskilling, equals labour market problem solved?

The scale of the inactivity challenge demands a look outside of the typical policy toolbox for solutions. This starts with what works.

The charity sector should be top of the list of places to look for new solutions because, while it is by no means perfect, it is notably better than the rest of the economy at employing the parts of the population most likely to be inactive. Consider people with disabilities - a real charity sector success story. The growth in employment of people with disabilities in the sector has significantly outstripped the UK economy as a whole, with people with disabilities now accounting for over one-fifth (22%) of civil society jobs, up from 14% at the start of the last decade. That figure is 6 percentage points higher than the rest of the economy. Or take older people - 27% of civil society jobs are filled by people aged 55 and over, compared to just 20% in the rest of the economy.

And with well over a third of civil society jobs undertaken on a part-time basis, compared with a quarter of jobs in the rest of the economy, it is fair to suggest that the flexibility of the sector might make it more welcoming to women returning to work. Indeed, two-thirds of jobs in civil society (67%) are filled by women, compared with 47% of women in the rest of the economy.

Clearly, civil society is getting something right when it comes to employing people who are at risk of inactivity. Other sectors and policymakers might be able to learn from the sector.

But government should also be looking to the charity sector for the direct solutions it offers to get inactive people into work.

There are 1,700 charities in the UK focused primarily on employment and training, and some of them can truly transform lives. The Prisoners’ Education Trust, for example, helps incarcerated people into work by supporting their enrolment in distance learning courses before they are released from prison. On average, they increase a person’s chance of finding work by 26%. There is a plethora of similarly effective programmes for disadvantaged young people run by charities across the UK. The Spear Programme, led by Resurgo, provides coaching to disadvantaged young people out of work. An Employment Data Lab study found that the percentage of Spear participants classed as not in employment, education or training (NEET) one year after starting the programme was between 5 and 12pps less than it would have been had they not participated in the programme. There may be huge benefits to be gained from learning from and scaling up similarly effective services across the country in a bid to tackle inactivity.

As part of this process, it is essential that policymakers appreciate the unique role that charities fulfil in the ecosystem of support available to the inactive population. Charities’ independent, not-for-profit and inherently purposeful nature means that they can offer employability help to people who might distrust or be disaffected by the traditional state support on offer at Jobcentres. Many charities specialise in serving particular groups, which enables a tailoring of support that the state finds difficult. Great examples include the partnership that the NHS and Refugee Council has established to help refugee health professionals re-qualify, and the employability support offered to service leavers and veterans considering employment in the land sector offered by charity HighGround. While these services might be relevant to only a very small fraction of the inactive population, they can make an enormous difference to the demographic at which they are aimed.

There is also a clear imperative for policymakers to explore the other differences between the voluntary, state and private provision of services which are essential to solving inactivity. Department for Education figures show that voluntary organisations providing early years childcare are, on average, both more affordable to parents and a higher quality for children, with lower staff-to-child ratios and lower staff turnover than private providers, all offered at a lower average rate per hour. Voluntary providers were also less likely than private providers to have increased their hourly rates in 2022.

Third sector providers of training have also historically been shown to be better at engaging with hard-to-reach learners, delivering a higher proportion of training to female learners, people with learning difficulties and/or disabilities, and older people than other kinds of support. These are precisely the groups the government is trying to reach with its reskilling programmes. However, as evidence of this successful engagement with hard-to-reach learners is around a decade old, examining whether this still holds true and how the third sector possesses a comparative advantage could help policymakers to make a meaningful difference to the skills of the inactive population.

An examination of the charity sector’s role in supporting inactive people into work would be incomplete without a look at volunteering – something which studies show can have a significant impact on inactive individuals, depending on who they are, why they are out of work, and how much volunteering they do. On average, when 45-60-year-olds volunteer monthly (or on a slightly less frequent basis), it has a positive effect on their chances of moving into work. For unemployed people overall and disabled people specifically, volunteering several times a year has also been shown to have a positive effect on their chances of moving into employment. Similarly, for those out of work due to family caring responsibilities, volunteering on a monthly basis has a positive effect too.

Volunteering can help people directly through the experience, skills and connections that they gain, but the health benefits of volunteering are particularly pertinent given the causes of the UK’s inactivity problem. Volunteering at least once per month has been shown to benefit the mental health of economically inactive groups, such as those out of work due to caring responsibilities and as a result of their own long-term sickness. Specifically, frequent volunteering can buffer the negative impacts of family care or long-term sickness for men, and the negative impacts of unpaid work for women.

As formal volunteering rates are currently in decline, efforts to increase volunteering among the economically inactive would be timely.

Many of the solutions which can make a difference to the UK’s serious inactivity problem already exist within the charity sector. Not only is it a leading employer of many groups which the government is most anxious to get into work, it also provides effective, specialist employability services to groups that current state solutions do not work for. The charity sector may be better than other sectors at providing training for people most likely to be inactive and better at providing affordable childcare, which is vital to increasing activity, and the volunteering opportunities it offers can improve the health of inactive people and support them back to work. Inactivity is such a substantial and multi-layered challenge that policymakers must seek out bold solutions, which may live outside of the usual policy toolbox, starting with the charity sector.